Business & Finance

TVA Leases Plant to Raise $1 Billion

By Steven Johnson | ECT Staff Writer Published: January 20th, 2012

The Tennessee Valley Authority has come up with a different way to raise $1 billion—lease a power plant.

The Tennessee Valley Authority is raising $1 billion by leasing its John Sevier natural gas plant to investors. (Photo By: TVA)

The Tennessee Valley Authority is raising $1 billion by leasing its John Sevier natural gas plant to investors. (Photo By: TVA)

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    As a way of limiting the money it needs to borrow for future projects, TVA will lease the John Sevier Combined Cycle Plant to a group of investors for 30 years.

    John Thomas, chief financial officer of the nation’s largest public power provider, compared the transaction to leasing a car.

    “The use of lease-purchase financing gives us greater financial flexibility as we pursue a number of significant capital projects to realize our vision of providing cleaner energy,” he said in a statement.

    “As a supplement to traditional bond financing, the use of lease financing can help hold down costs and rates for our customers.”

    The 880-megawatt plant in Rogersville, Tenn., is powered by natural gas and comes with a price tag of $820 million. Scheduled to start commercial operations this summer, it is located adjacent to the coal-based John Sevier Fossil Plant, where TVA plans to retire two units.

    TVA will continue to operate the plant and take it over when the 30-year pact expires. “From an operational standpoint, it is pretty seamless. TVA will maintain the facility, purchase fuel for it and take all the power it generates,” Thomas said.

    TVA rental payments to John Sevier Combined Cycle Generation, the investment group, will secure a $100 million equity investment and a $900 million bond issue from the investors.

    The move will keep additional debt from accumulating on TVA’s ledger; the authority has a debt ceiling set by Congress. Some of the money is expected to help finance an estimated $4.9 billion TVA needs to complete its Bellefonte Nuclear Plant in Alabama.

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