The Tennessee Valley Authority (TVA) approved a recommendation by its chief financial officer David N Smith to reduce the carrying value of certain TVA assets by $3.4 billion.

Asset values being reduced are Watts Bar 2, $1.72 billion; Bellefonte, $500 million; site development costs at the cancelled Hartsville plant, $410 million; and deferred debt refinancing costs, $789 million. After adjustment, TVA will have total assets of $29.7 billion. TVA said this reduction does not prevent them from making the assets, such as Watts Bar 2 or Bellefonte, productive in the future.

TVA chairman Glenn McCullough Jr said finishing the twin unit Bellefonte plant as a nuclear operation or converting the site to natural gas or coal are being weighed by a TVA task force. The $500 million written off on Bellefonte was for assets that cannot be used under any scenario. A further $4.1 billion invested in the plant has not been written off.

TVA ended the 2001 fiscal year with revenue of nearly $7 billion, reflecting increased power sales and lower interest expense, and reduced debt by over $600 million, according to unaudited financial results presented to the TVA Board. The asset valuation adjustment will be charged against TVA’s existing $3.7 billion in retained earnings.

Smith said that devaluation of assets is a “non-recurring accounting adjustment” with no impact on cash flow, rates, or TVA’s ability to service its debt. TVA does not expect any change in its triple-A bond rating.

“TVA is financially stronger as evidenced by the 2001 results, and we are meeting our customers’ needs by providing affordable, reliable electric power,” said McCullough. “These adjustments will more accurately reflect the value of our assets and help TVA maintain competitive prices in the electricity marketplace of the future.” John Howes, executive director of TVA Exchange, said TVA still needs to do a lot “to straighten out their balance sheet,” pointing to their $25 billion debt.

According to financial results for the 2001 fiscal year, which ended 30 September, power sales increased by 1.2% over sales the previous year.