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TVA Sells $1.5 Billion of 10-year Global Power Bonds

KNOXVILLE -- The Tennessee Valley Authority sold $1.5 billion of 10-year global power bonds Thursday that carry an interest rate of 3.875 percent, representing the lowest-ever rate for a TVA 10-year "bullet maturity" institutional bond offering.

Taking advantage of the lack of supply of high-quality bonds and the historically low interest rate environment, TVA chose to issue the 10-year bonds to fill strong investor demand at that yield. The order book included purchases from insurance companies, money managers and other investors in the United States, Canada and Europe.

"This type of low-cost financing gives TVA the opportunity to provide more economical service to our customers," TVA Chief Financial Officer John Thomas said. "It helps keep TVA's electricity prices low."

Bank of America, Merrill Lynch, Barclay's Capital and Morgan Stanley were joint managers for the offering. Proceeds from the sale will be used by TVA to refinance existing debt and for other power system purposes.

TVA receives no funding from taxpayers, and pays its own way with revenues from power sales and power program financings. TVA looks for a combination of favorable market conditions and strong investor demand in making its long-term funding decisions.

TVA's rated power bonds are expected to be rated "Aaa" by Moody's Investors Service and "AAA" by Fitch Ratings and Standard and Poor's. The new bonds mature on Feb. 15, 2021, and are not subject to redemption prior to maturity. Interest will be paid semi-annually each Feb. 15 and Aug. 15.

Application has been made to list the bonds on the New York Stock Exchange. The bonds will also be issued, maintained and transferred through the book-entry system of the Federal Reserve Banks. Transactions may be cleared and settled by international participants through Clearstream and Euroclear. The bonds can be identified by the CUSIP number 880591EL2.

Electricity prices in TVA's service territory are below the national average.

Published February 4, 2011

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