TVA Prices $500 Million Of New 30-Year Bonds

by Paul Ciampoli
APPA News Director
September 9, 2022

The Tennessee Valley Authority (TVA) recently priced $500 million of new 30-year maturity global power bonds, with an interest rate of 4.25 percent.

The offering marked TVA’s first 30-year bond since 2012 and the 4.25 percent rate is tied as the second lowest ever for a TVA bond of 30 years or longer in maturity. 

Despite an increase in interest rates in the first half of the year, long-term rates remain at historically low levels, creating an opportunity for TVA to secure long-term funding at attractive levels, TVA noted.

“We were pleased to see a window of stability develop in recent weeks, and an opportunity for TVA to take advantage of still historically low long-term rates,” said TVA’s Treasurer and Chief Risk Officer Tammy Wilson. “With one of the nation’s largest electric power systems, TVA is a natural issuer of longer-maturity bonds, and the success of this transaction shows the confidence investors have in TVA and the strength of the public power model.”

Strong demand for high quality investments of longer duration contributed to the success of the offering, TVA said. The bonds drew interest from a variety of investors including asset managers, pension funds, and insurance companies, among others. 

“The new 30-year bond fits well in TVA’s debt profile, which has a low number of bonds maturing in the early 2050s.  TVA debt levels remain at the lowest levels in over 30 years, and the new bonds will help TVA maintain stable interest costs for decades to come,” added Wilson.

Bank of America, Morgan Stanley, RBC Capital Markets, and TD Securities served as joint book-running managers for the transaction. The proceeds of the bonds will be used to refinance existing debt and for general power system purposes.

The new bonds will mature on September 15, 2052 and are not subject to redemption prior to maturity. Interest will be paid semi-annually each March 15 and September 15. Application has been made to list the bonds on the New York Stock Exchange.

TVA Board Holds Base Rates Steady, Increases Customer Credits for FY23

In other recent news, TVA’s Board of Directors on Aug. 31 maintained a stable course for wholesale base electric rates in fiscal year 2023, consistent with long-range financial plans to keep base rates flat through the end of the decade.

Over the past ten years, TVA’s effective wholesale power rate has maintained an average of about 7 cents per kilowatt-hour, giving families needed relief from the pandemic, and record inflation and fuel prices, TVA said.

In addition, due to strong operational and financial performance, the Board increased a previously approved Pandemic Recovery Credit back to 2.5 percent for all customers, providing about $230 million.