The Tennessee Valley Authority has agreed to give its distributors another three years to work out long-term financing for their precedent-setting ownership in a gas-fired power plant TVA operates in Mississippi.
TVA directors today granted a 3-year extension to the Seven States Power Corp., to work out details of a pioneering arrangement in which municipalities and power cooperatives in the Tennessee Valley have bought generating assets from TVA for the first time. The distributor group, organized by the Chattanooga-based Tennessee Valley Public Power Association (TVPPA), has been working for the past two years to find permanent financing for its 90 percent stake in the combined-cycle, gas-powered plant in Southaven, Miss.
TVA operates and owns the other 10 percent of the Southaven plant. TVA has backed the venture by agreeing to repurchase Seven State's interest for $412 million if long-term financing is not arranged.
"TVA is very committed to working out a long-term agreement with Seven States and we have been working diligently together to find that solution," TVA Chief Financial Officer Kim Greene said. "But it is a tough agreement to work through so we are continuing the discussions and need additional time."
Without the extension, TVA would have had to buy back the plant by April 30, Ms. Greene said.
During a TVA board meeting today in Bristol, Va., TVA President Tom Kilgore said the partnership between TVA and its distributors over joint ownership of the plant "is a tough agreement to work through" but one that could help TVA and its distributors.
TVPPA President Jack Simmons, who also is chief executive of the Seven States Power Corp., said distributors want to gain ownership of some of the power generating assets that their customers help finance. He said the arrangement "will strengthen the partnership" between TVA and its 156 local power distributors, including EPB in Chattanooga, Volunteer Energy Corp., and the North Georgia Electric Power Cooperative.
TVA currently must include the purchase and leaseback agreement for the Southaven plant as part of its total debt obligations measured by the federal budget office. But if the plant interest is sold, TVA could reduce its debt obligations by more than $400 million while still getting the power from the Mississippi plant.